Correlation Between Hochschild Mining and Digital China

Can any of the company-specific risk be diversified away by investing in both Hochschild Mining and Digital China at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Hochschild Mining and Digital China into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Hochschild Mining plc and Digital China Holdings, you can compare the effects of market volatilities on Hochschild Mining and Digital China and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Hochschild Mining with a short position of Digital China. Check out your portfolio center. Please also check ongoing floating volatility patterns of Hochschild Mining and Digital China.

Diversification Opportunities for Hochschild Mining and Digital China

0.02

Correlation Coefficient

Hochschild Mining  Digital China

Significant diversification

The 3 months correlation between Hochschild and Digital is 0.02. Overlapping area represents the amount of risk that can be diversified away by holding Hochschild Mining plc and Digital China Holdings in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Digital China Holdings and Hochschild Mining is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Hochschild Mining plc are associated (or correlated) with Digital China. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Digital China Holdings has no effect on the direction of Hochschild Mining i.e., Hochschild Mining and Digital China go up and down completely randomly.

Pair Corralation between Hochschild Mining and Digital China

Assuming the 90 days horizon Hochschild Mining plc is expected to generate 0.73 times more return on investment than Digital China. However, Hochschild Mining plc is 1.37 times less risky than Digital China. It trades about 0.09 of its potential returns per unit of risk. Digital China Holdings is currently generating about 0.05 per unit of risk. If you would invest  168.00  in Hochschild Mining plc on October 12, 2024 and sell it today you would earn a total of  94.00  from holding Hochschild Mining plc or generate 55.95% return on investment over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Insignificant
Accuracy	100.0%
Values	Daily Returns

Hochschild Mining plc  vs.  Digital China Holdings

Hochschild Mining plc

Risk-Adjusted Performance

4 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Hochschild Mining plc are ranked lower than 4 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Hochschild Mining may actually be approaching a critical reversion point that can send shares even higher in February 2025.

Digital China Holdings

Risk-Adjusted Performance

8 of 100

OK

Compared to the overall equity markets, risk-adjusted returns on investments in Digital China Holdings are ranked lower than 8 (%) of all global equities and portfolios over the last 90 days. Despite nearly fragile basic indicators, Digital China reported solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Hochschild Mining and Digital China

The main advantage of trading using opposite Hochschild Mining and Digital China positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Hochschild Mining position performs unexpectedly, Digital China can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Digital China will offset losses from the drop in Digital China's long position.

The idea behind Hochschild Mining plc and Digital China Holdings pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Share Portfolio module to track or share privately all of your investments from the convenience of any device.